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Photo: Francois Lo Presti/AFP via Getty Images

The outlook for global automakers and suppliers continues to worsen, amid heightened risk from supply chain disruptions, including the ongoing semiconductor chip shortage.

Driving the news: IHS Markit slashed its forecast for global light-vehicle production in 2021 by 6.2% — about 5 million vehicles. It's cutting even deeper — 9.3% or about 8.45 million vehicles — for 2022.

It's unusual for IHS Markit to whack its forecast by so much, but the compounding effects of the chip shortage, including COVID-19 restrictions in Southeast Asia where packaging and testing occurs, warrants the pessimistic outlook, the company said in a release.

  • About 4 million units of production have already been lost through the first half of 2021, and another 3.1 million or more units could be lost in the third quarter, per IHS Markit.
  • The chances of making that up by the end of the year are becoming less likely.

Of note: Toyota cut its September production plans by 40% and said it will reduce its targets for October too.

  • "This is symptomatic of the ongoing volatility in the sector and the continued lack of visibility beyond the very short term," said Mark Fulthorpe, executive director for global light vehicle forecasting at IHS Markit.

What to watch: There could be a silver lining, however.

  • RBC Capital Markets auto analyst Joseph Spak said the lower outlook could be "a clearing event" for the industry.
  • While the industry needs time to build back inventory, manufacturers might not go back to prior levels of production because they've seen that there's higher profit in keeping vehicle supplies tight, he noted.
  • Ford and GM have talked about trying to better match supply and demand through the use of "order banks" instead of shipping lots of cars to dealers and letting them figure out how to sell them.

Yes, but: Automakers have a history of falling back on bad habits.

Go deeper

Ben Geman, author of Generate
Oct 21, 2021 - Economy & Business

Tesla is outrunning the supply chain crunch

Expand chart
Data: FactSet and company release; Chart: Will Chase/Axios

Tesla, citing a "structural shift" in demand for electric vehicles, reported its highest-ever quarterly profit of $1.6 billion and $13.8 billion in revenues despite supply chain problems.

The big picture: The company's third-quarter report says the chip shortage, port congestion and other woes have affected its factories but argues that "flexibility" and "ingenuity" are a counterweight.

Updated 3 hours ago - Politics & Policy

Giuliani associate Lev Parnas convicted of campaign finance crimes

Lev Parnas, a former associate of then-President Donald Trump’s personal lawyer Rudy Giuliani. Photo: Stefani Reynolds/Bloomberg via Getty Images

Florida businessman Lev Parnas was convicted Friday on charges of conspiracy to make foreign contributions to political campaigns, according to multiple outlets.

Why it matters: Prosecutors said Parnas, then an associate of former President Donald Trump's personal lawyer Rudy Giuliani, funneled over $150,000 from a Russian businessman into U.S. campaigns as part of an effort to land licenses in the U.S.'s legal cannabis industry.

Supreme Court agrees to hear challenges to Texas abortion law

Photo: Saul Loeb/AFP via Getty Images

The Supreme Court on Friday agreed to hear two cases challenging Texas' abortion law, which bans the procedure as soon as six weeks into pregnancy, but left the law in place in the meantime.

Why it matters: The court is moving extraordinarily fast on the Texas cases, compressing into just a few days a process that normally takes months. And that schedule means the court will take up Texas' ban a month before it hears another major abortion case — a challenge to Mississippi's own 2018 ban on abortions after 15 weeks.